Thursday, January 29, 2009

Thursday, January 29, 2009

The formal count is finally in: university endowments fell an average of 22.5% in the first six months of Fiscal Year 2008-09 (starting July 1, 2008). Returns for 2008 overall, including the first half of the year, were better, but that was the end of an era. The Inside Higher Ed coverage linked above also noted the continuation of an established trend:

The richest colleges performed best. Colleges with endowment assets of greater than $1 billion were the only colleges with positive investment returns — 0.6 percent – in 2008, the study found. Colleges with the smallest endowments, below $50 million, had the largest losses — 4.3 percent on average.

Dependence on endowments has been desperately short-sighted. So are the responses to endowment declines. The two saddest involve university museums. Brandeis is thinking of trying to get a one-time kick in revenues by selling its entire art collection. Penn has announced the firing of all 18 of its museum's academic research staff - unless they can fund-raise for their own salaries.

There are all sorts of problems with the fundraising strategy - it costs a lot of money to raise money, the returns are narrowly targeted to donor projects (98% so at the University of California), they allow donors to short-circuit academic planning. Universities should publish net donor figures so we can account for the costs of raising the money in the first place.

Donations are going to fall even more than they have, so the weakness of fundraising as a main financial pillar is going to get more obvious in the next couple of years. But few people really understand the tension, and often the flat contradiction, between academic research and fundraising. The retro-philistinism of the Penn museum director helps us out here:

Richard Hodges came to the museum as director in 2007, moving from Britain, where he was director of the Institute of World Archaeology at the University of East Anglia. He repeatedly described the changes he is leading as being about moving the museum “into the 21st century.” To do that, he said, the museum needs both money and a change in attitude.

“What we hope is that as a museum we will focus not on the personal research of the range of individuals, but essentially concentrating on the museum’s extraordinary collections and getting those out to a world audience,” he said. By eliminating the salaries of the 18 researchers, the museum will save about $1 million a year, he said.

Told that some of those whose jobs are being eliminated have said he is trying to run the museum like the Wharton School, with the assumption that anyone good can find money, he doesn’t balk at the comparison with Penn’s acclaimed business school. “Why not?” Hodges said. Many scientists of course must win grants to cover salaries if they want to win tenure. Hodges said that in his position in Britain, if he didn’t land grants, his team members would lose their jobs.

Of the prior approach at the Penn museum, he asked, “Why are we sustaining a tradition that believes that all we do is go out and do research for our ends?” He said that the current researchers “through no fault of their own” have been working in an outdated model of following their research interests and not raising money. “They have been in a different kind of institutional structure,” he said.

He added that “the critics are saying we should be frozen in time, speaking a language which is different from the language I speak.”

One idea being discussed — and much criticized by the scholars angry over the job eliminations — is adding an upscale restaurant to the museum.